Refinancing To Release Equity
Equity is simply the amount of built up value in your home minus what you owe on your mortgage. For example, if the value of your home is $650,000 and your mortgage is $300,000 you have $350,000 equity in your property.
How Much Equity Can You Access?
When accessing equity for a worthwhile purpose it is a good idea to keep your loan balance below 80% of the properties value. This percentage is called the LVR or loan to valuation ratio.
Loans with an LVR of 80% or less do not require lenders mortgage insurance. Lenders will be able to make a determination about your loan without referring to the mortgage insurers policy guidelines.
In the example above a loan with an LVR of 80% would simply be a loan of $520,000. That is, $520,000 / $650,000 = 80%.
In this example the borrower could access $220,000 for a worthwhile purpose. That is, $520,000 – $300,000 = $220,000.